Why You Only Need 290K in Super To Retire

If you’re worried that your superannuation savings are inadequate, you're not alone. Around 65% of Australians retire with less than $250,000 in their superannuation. 

However, upon closer examination, you may discover that your financial situation is more favourable than anticipated. In fact, you might be pleasantly surprised to find yourself in a better position than those who have accumulated larger sums in their superannuation funds.

There are compelling reasons to feel optimistic about your retirement prospects, as your savings could align closely with what experts’ term "the sweet spot." 

This is where individuals, both singles and couples, with superannuation and other assets totalling less than $301,750 for singles and $451,500 for couples, may find themselves in a more advantageous position compared to those who have diligently saved hundreds of thousands more.

If you listen to some financial advisors, they often say you need $1,000,000 in super to retire. That’s a scary number for most people and not realistic. But this is not the case if you qualify for the old age pension. 

Let me explain…

Consider this scenario: a single homeowner with $301,750 in superannuation and additional assets may enjoy a comparable income in retirement to a single individual with total assets amounting to $830,000. 

Similarly, a couple with $451,500 in superannuation may achieve a similar retirement income to a couple with assets totalling $1.25 million.

For many individuals, particularly those in the middle-income bracket, focusing solely on accumulating more savings in their superannuation funds may not necessarily translate to improved financial outcomes in retirement. 

How is this possible?

How pensions work

To qualify for an age pension, you must reach age 67. You must then pass an assets test. This means your assets must be less than the amounts listed in the table below:

To qualify for a pension you must  be age 67 and undergo both an income test and an assets test. The test resulting in the lesser pension amount is applied.

Income Test: 

Effective from March 20, 2024, a single pensioner may earn up to $204 per fortnight and remain eligible for the full single pension of $1116.30 per fortnight, inclusive of all supplements. Additionally, they can earn $460 per fortnight from personal exertion, which is not factored into the income test. Beyond $204 per fortnight, the pension decreases by $0.50 for each additional dollar earned.

For pensioner couples, effective from March 20, 2024, a combined fortnightly earning of $360 maintains eligibility for the full pension of $1,682.80 per fortnight, including all supplements. Each partner can also earn $460 per fortnight from personal exertion, excluded from the income test. The pension decreases by $0.50 for each additional dollar earned beyond $360 per fortnight.

Assets Test: 

As of March 20, 2024, full pension eligibility under the assets test applies to single homeowners with assessable assets below $301,750, and for homeowner couples, the threshold is $451,500. The thresholds for non-homeowners are $543,750 for singles and $693,500 for couples.

Upon surpassing the lower threshold of assessable assets, the pension decreases by $3 per fortnight for each additional $1000 above the threshold.

A single homeowner can possess up to $674,000 in assessable assets and still receive a partial pension, while for single non-homeowners, the upper threshold is $916,000. For couples, the upper thresholds are $1,012,500 for homeowners and $1,245,500 for non-homeowners.

Let’s now look at some examples of where people have been able to combine the pension with their super and provide for a comfortable retirement. 

Case study 1: Single mum, homeowner aged 67.  

Jane has $290,000 in her super and other assets not including her home. She qualifies for a full age pension and would receive $29,023 p.a. 

When combined this with her superannuation of $22,255 p.a. it brings her total income to $51,278 p.a. (tax free), indexed to inflation until age 85, giving her a comfortable retirement.

As a ‘work bonus’ if she decides to work, she can earn an additional $4,000 p.a. plus $204 per fortnight $5,304 p.a. a total of $9,304 (tax -free) without effecting her pension.

Case study 2: Couple, homeowners aged 67.

Steve and Cathy have $451,000 in their super and other assets (not including the home). They qualify for a full age pension and would receive $43,758 p.a. 

When combined this with their superannuation of $28,390 p.a. it brings her total income  to $72,148.19 p.a. (tax free) indexed to inflation until age 85.

As a ‘work bonus’ if they decide to work, they can earn an additional $4,000 p.a. plus $360 per fortnight $5,304 p.a. a total of $13,360 (tax-free) without effecting their pension.

Take action now…

If you are close to retirement, you should take proactive action to plan for a comfortable stress-free retirement. If you would like my team and I to help you, please contact us for a free no obligation meeting.  

Disclaimer: This article contains general information only. It is not designed to be a substitute for professional advice and does not take into account your individual circumstances. Therefore, no responsibility can be accepted for any action taken as a result of any information contained in this newsletter.